While there has been an uptick in Christchurch industrial vacancy over the past eight months, it is still extremely low and sitting well under long-term averages.
Results from Colliers’ first Christchurch industrial occupancy survey show that, as of June 2024, vacancy across the city’s primary industrial precincts stood at 3.2 per cent.
Sam Staite, Director of Industrial at Colliers Christchurch, says vacancy has increased over recent months, particularly within larger format warehousing, as demand, largely from the logistics sector, has slowed in line with expectations.
“Given the downturn in retail activity and reduced inventories being held, slowing demand is not unexpected. But vacancy remains well below the long-term levels of between 5 per cent and 5.5 per cent.”
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Staite says an emerging trend is the increasing number of large businesses dividing their distribution centres between the North and South Islands which is absorbing some of the larger vacancies.
“Easing demand coupled with financing challenges is reflected in the slowing supply of new inventory.”
Building consents issued for the year ending June 2024 approved the construction of approximately 181,350sq m of new industrial floorspace, down by nearly a quarter compared to the year ended June 2023.
After an extended period of heightened activity, both speculative and design-build development activity has softened.
Warehouse rents have stabilised over the first half of 2024, having increased by approximately 22 per cent between June 2022 and December 2023. Average net prime grade warehouse face rents currently stand at $139 per square metre, although figures vary across precincts. Brand-new prime warehousing rates are now regularly being struck at closer to $150 per square metre.
Staite is picking an increase in sales activity following the reduction in the Official Cash Rate with further cuts to occur over the balance of this year and through 2025.
“Over the past month the investor, owner-occupier, and tenant enquiry levels from across New Zealand are all well up from the previous six months. Investors are considering the falling deposit rates and more favourable borrowing conditions, and this is driving them back toward commercial property investment,” Staite says.
“Although investment sales in the first half of 2024 were subdued, this was largely due to low availability of quality assets available for purchase. Owner-occupier demand remains buoyant and availability of vacant buildings for sale is also low. Prime grade assets have continued to command high levels of investor interest and Christchurch’s prime values have not seen the falls experienced in some of the other larger centres.”
- Supplied by Colliers
